|By Zeke Faux and Jody Shenn, Bloomberg, 08/31/2011|
MarketMinder's View: More evidence, in our view, ratings agencies are frequently confused in their assessments. For more, see our 07/28/2011 cover story, “Confused About Credibility?”
|By Steve Matthews and Joshua Zumbrun, Bloomberg via Businessweek, 08/31/2011|
MarketMinder's View: There are many inputs into the US economy—labor supply is certainly one of them—and no one factor alone determines the US economy’s future direction. Demographic changes take place over long time periods—markets tend to discount events in the next 12-24 months, not the next couple decades. For more, see our 08/25/2011 cover story, “The San Francisco Fed’s Generation Gap.”
|By Larry Elliott, The Guardian, 08/31/2011|
MarketMinder's View: We’d quibble with the concept of a lasting recovery—businesses and markets typically experience ups and downs. While we think volatility likely continues, that needn’t prevent further global growth.
|By Michael Schuman, Time, 08/31/2011|
MarketMinder's View: We’d agree Europe faces some significant challenges. But don’t discount eurozone leaders’ determination to keep the monetary union intact. Despite prevalent political posturing, thus far, they’ve made deals when it’s mattered—and at this point, we think it’s likely they’ll do what’s needed for the bailout to succeed in the end.
|By Staff, The Telegraph, 08/31/2011|
MarketMinder's View: Chancellor Merkel’s government has been divided over the EFSF’s role—so the German cabinet’s agreement is an important step, though proposed EFSF enhancements still need parliamentary approval. For more, see our 08/30/2011 cover story, “Politicking and Progress in Europe.”
|By Lara Hoffmans, Forbes, 08/31/2011|
MarketMinder's View: The latest Forbes contribution from our managing editor.
|By Leah Schnurr, Reuters, 08/31/2011|
MarketMinder's View: “While fears the economy is falling back into recession have increased this month, some of the recent data has been consistent with a slow-growth scenario rather than a contraction.” We agree this looks more like a brief slow patch than a recession—pauses in growth are fairly normal two years into an expansion and needn’t prevent stronger growth down the road.
|By Mark J. Perry, Carpe Diem, 08/31/2011|
MarketMinder's View: Reducing regulatory burdens on entrepreneurs would likely be a net benefit to society. For more, see our 08/24/2011 cover story, “Regulating Regulators’ Regulations.”
|By Staff, NPR, 08/31/2011|
MarketMinder's View: Though no single data point means everything’s fine and dandy for the US economy, this suggests demand may be healthier than many suspect. For more, see today’s cover story, “Incremental Positives.”
|By Kathleen Madigan, The Wall Street Journal, 08/30/2011|
MarketMinder's View: We’d argue the August fall in consumer confidence speaks more to backward-looking sentiment and less to markets’ future direction—especially since recently improving US retail sales figures seem contradictory to sentiment. Watch what people do, not what they say. For more, see our 08/12/2011 cover story, “A Retail Pop.”
|By Susan Hockfield, The New York Times, 08/30/2011|
MarketMinder's View: The US manufacturing sector not only still plays a significant role in the domestic economy, it’s also still the largest in the world—just more efficient than ever. Meaning, manufacturing employment’s decreased over time—which isn’t necessarily a bad thing, since it leaves folks free to pursue more productive, efficient endeavors elsewhere. For more, see our 07/18/2011 cover story, “Breaking News-US Manufacturing Isn’t Dead.”
|By Staff, Reuters, 08/30/2011|
MarketMinder's View: China has inarguably grown quickly recently. But in our view, the US dollar is the most liquid and deepest global reserve currency right now—and that likely doesn’t change anytime soon.
|By Mark J. Perry, Carpe Diem, 08/30/2011|
MarketMinder's View: Some perceive China’s recent rapid growth to be a threat to US economic strength. But as Dr. Perry demonstrates, China actually represents a substantial and growing market for US exports—an overall positive for US manufacturers and exporters.
|By Kartik Goyal, The Washington Post, 08/30/2011|
MarketMinder's View: Despite sluggish growth in much of the developed world, there are pockets of economic strength elsewhere—like Emerging Markets, many of which continue to grow strongly for now.
|By Fisher Investments Editorial Staff, The Street, 08/30/2011|
MarketMinder's View: Our latest commentary on The Street.
|By Ramesh Ponnuru, Bloomberg, 08/30/2011|
MarketMinder's View: In our view, this largely hits the nail on the head. Lowering corporate tax rates and closing loopholes would likely increase tax revenue, attract greater capital investment and help bring more jobs to the US.
|By George Magnus, Bloomberg, 08/29/2011|
MarketMinder's View: Sure, the global economy’s grown slower recently than we’d like, but capitalism is hardly on the verge of crisis. Nor would we suggest Karl Marx’s way was superior. Communism hasn’t led to a lot of broad societal wealth or peace.
|By John Steele Gordon, The Wall Street Journal, 08/29/2011|
MarketMinder's View: While we’d quibble with a few points, overall, this is a highly sensible discussion of US debt and how to put it in proper perspective.
|By Robert Shiller, The New Republic, 08/29/2011|
MarketMinder's View: The idea government can just create jobs is something of a fallacy. But what it can do is reduce private-sector uncertainty by reducing burdensome regulations and simplifying corporate tax codes—thereby ultimately encouraging businesses to hire more and spend less complying with unnecessary rules.
|By Larry Elliott, The Guardian, 08/29/2011|
MarketMinder's View: Yes—this economy faces challenges. Which is always true—no period is pristine. However, a rational investor shouldn’t ignore the many current positives. The reality is, the economy’s recovering—albeit slower than many would like—but growth rate volatility is normal.
|By Jeff Bater and Andrew Ackerman, The Wall Street Journal, 08/29/2011|
MarketMinder's View: This is likely unexpectedly positive to most. We’d quibble that unemployment is holding spending back since it’s been high while spending has grown through this expansion. Still, consumer spending, wages and salaries rising doesn’t paint the dire picture many believe.
|By Don Boudreaux, Pittsburgh Tribune-Review, 08/29/2011|
MarketMinder's View: “…[E]lected officials understand they’ll get more votes by granting favors to vocal producer groups than by doing what’s right for the general public. ‘So the public be damned,’ murmurs the politician. ‘I want to be re-elected.’” Here, here!
|By John Helyar, Bloomberg Businessweek, 08/29/2011|
MarketMinder's View: Important to note US manufacturing isn’t dead—though employment has trended lower over the years thanks to increased productivity. The US produces more with less—an overall positive.
|By Staff, The Wall Street Journal, 08/29/2011|
MarketMinder's View: More oil rigs drilling is a good sign of the market’s expectation for rising oil demand—which likely stems from a growing global economy.
|By Dan Caplinger, The Motley Fool, 08/26/2011|
MarketMinder's View: Probably not. Boomers have long investment horizons, over which they’ll probably need to keep growing their assets. Plus, many have wealth tied up in less liquid investments, which they’ll likely liquidate at some point. And don’t discount the boomers’ kids, which may prove an even greater source of equity demand. For more, see our 08/25/2011 cover story, “The San Francisco Fed’s Generation Gap.”
|By Pankaj Mishra, The Guardian, 08/26/2011|
MarketMinder's View: None of the ill-effects noted here can necessarily be attributed to globalization. Moreover, the piece largely ignores the positive benefits of increased globalization—jobs created, lives enriched and wealth created—across all classes.
|By Laura D’Andrea Tyson, The New York Times, 08/26/2011|
MarketMinder's View: We fail to see how the views here comport with a few key facts: Businesses components of GDP grew a healthy 6.4% in Q2, corporate profits are at an all-time high, and personal consumption (i.e., demand) has grown steadily for two years.
|By Tom Barkley and Jeffrey Sparshott, The Wall Street Journal, 08/26/2011|
MarketMinder's View: Growth is growth, no matter which way you shake it. Expectations broadly are for continued growth in 2011, and we agree. For more, see our 07/29/2011 research column, “US Q2 2011 GDP and a Word on Revisions.”
|By Jon Hilsenrath, The Wall Street Journal, 08/26/2011|
MarketMinder's View: Expectation of a third round of quantitative easing (an unnecessary move in our view) was met with disappointment Friday. For more, see our 08/23/2011 cover story, “Jawboning, Speculation and Hot Air.”
|By Staff, The Economist, 08/26/2011|
MarketMinder's View: A sensible look at Japan’s rebuilding effort and evidence developed economies are much more resilient than most think.
|By Mark J. Perry, Daily Markets.com, 08/26/2011|
MarketMinder's View: Skyrocketing corporate profits are yet another sign firms are healthier than many folks appreciate.
|By Mark Buchanan, Bloomberg, 08/25/2011|
MarketMinder's View: This is based on several assumptions—one, that only investors seeking to hedge downside risk benefit from derivatives. But what about farmers seeking to protect themselves against a slow year for crops, for example? There are many uses for derivatives. But consider also: Volatility moves both ways. So seeking to stop downward volatility could stop the upside as well—something we doubt many investors truly wish for.
|By Steven Russolillo and Corrie Driebusch, The Wall Street Journal, 08/25/2011|
MarketMinder's View: The reality is volume isn’t a sure-fire predictor of future direction—as with many indicators, it’s at best coincident and often just backward looking, making it a more interesting historical tool than a valuable predictor of future market movements.
|By Editors, Bloomberg, 08/25/2011|
MarketMinder's View: We’ve said many times unemployment improvement lags recovery—and the most recent downturn’s aftermath hasn’t been all that different from historical recessions. While we’d all prefer faster improvement, suggesting government can magically solve the problem is a bit overly optimistic about its efficacy. Better to reduce barriers and encourage greater economic activity—that would likely lead to faster employment growth.
|By Simon Johnson, The New York Times, 08/25/2011|
MarketMinder's View: Transparency is good, in our view. And recent stress tests have added to that, so that’s a plus. But the reality is folks are highly likely to always doubt government-ordained risk assessments. And in terms of stress tests’ ability to boost confidence, returns seem diminished with each successive iteration. For more, click here for our 08/17/2011 column on The Street.
|By Timothy Homan, Bloomberg, 08/25/2011|
MarketMinder's View: Contrary to common media portrayals, a weaker dollar can benefit the US economy in several ways, as outlined here.
|By Paul Krugman, The New York Times, 08/25/2011|
MarketMinder's View: While we wouldn’t necessarily agree with this article’s discussion of the 2008 financial crisis’s actual cause, we definitely agree it wasn’t excessive public debt.
|By Russ Roberts, Café Hayek, 08/25/2011|
MarketMinder's View: A fitting tribute to an entrepreneur in the truest American sense of the word.
|By Fisher Investments Editorial Staff, The Street, 08/25/2011|
MarketMinder's View: Our latest exclusive column for The Street.
|By Lara Hoffmans, Forbes, 08/25/2011|
MarketMinder's View: Our managing editor’s latest contribution to Forbes.
|By Matt Phillips, David Wessel and Steven Russolillo, The Wall Street Journal, 08/24/2011|
MarketMinder's View: This article starts with the following assumption: “US stocks jumped on Tuesday as many investors sent a plea to Federal Reserve Chairman Ben Bernanke: Come to the rescue of the stalling economy and battered financial markets.” It’s generally a fallacy to assume any one force is driving markets, but it’s speculation of the highest order to assume it’s a call for Fed action. Why totally disregard economic data from the eurozone and China, among other factors, that beat estimates yesterday?
|By Jonathan Berk, Bloomberg, 08/24/2011|
MarketMinder's View: We’re all for changing the nature of corporate taxation with an eye toward simplification—that’s perfectly sensible. But we don’t quite understand the article’s objective in docking investors instead. How about none of the above?
|By Lloyd Khaner, Minyanville, 08/24/2011|
MarketMinder's View: This is a myopic, largely backward-looking view of widely known market fears. And that they are so widely addressed likely means they lack needed surprise power (absent material new information) to drag markets far down for long. For more, see our 08/05/2011 cover story, “Corrective Action.”
|By Tomoko A. Hosaka, Associated Press, 08/24/2011|
MarketMinder's View: Bond markets continue to show ratings agencies are far less relevant than many assume. In this case, yields on 10-year Japanese government notes were flat following the announcement.
|By Martin Sandbu, Financial Times, 08/24/2011|
MarketMinder's View: A solid counterpoint to the often-repeated thesis the West is in terminal decline. An excellent read.
|By Mark J. Perry, Carpe Diem, 08/24/2011|
|By Robert Johnson, Morningstar, 08/24/2011|
MarketMinder's View: This is a sensible piece examining the various economic reports that came out last week and seemingly sent markets downward.
|By Luca Di Leo and Tom Barkley, The Wall Street Journal, 08/24/2011|
MarketMinder's View: Durable goods orders epitomizes the volatility of some economic indicators well. The 4% jump in July (after June’s -1.3% drop) was mostly driven by increased demand for autos and airplanes. It’s rather typical for these numbers to gyrate, and recent activity is certainly no exception. But that the data were overall rather positive illustrates the fact not all economic data are uniformly negative in recent reports.
|By Michael S. Derby, The Wall Street Journal, 08/23/2011|
MarketMinder's View: The notion retiring baby boomers will materially impact stocks over the next 25 years misunderstands several key factors. First, baby boomers have an enormous amount of wealth tied up in businesses they own and run—a lot of which they’ll eventually start liquidating and moving to stocks and bonds. Also, boomers retiring today and in the future don’t have a short time horizon—they may live into their 80s or beyond! Many of them will need some degree of growth (and therefore, stocks). Further, stocks tend not to price in far-off shifts. They react to what they see coming in the next 12 to 24 months.
|By Michael Lind, Financial Times, 08/23/2011|
MarketMinder's View: Well, we think this all rather ignores the fact that economic opportunity in the US provides incentive for risk-taking entrepreneurs to create something where nothing currently exists—providing not only a societal benefit with a new good or service, but also creating jobs and potential shareholder wealth.
|By Richard A. Posner, The New Republic, 08/23/2011|
MarketMinder's View: Let’s be honest: The US and global economies have grown for two years—and notwithstanding ongoing growth rate volatility seem poised to continue doing so. For more, see our 08/12/2011 cover story, “A Retail Pop.”
|By Mary Pilon, Liam Plevin and Jason Zweig, The Wall Street Journal, 08/23/2011|
MarketMinder's View: Gold’s run doesn’t change this basic fact: It’s just a commodity, not a reliable inflation hedge. Its long-term returns badly lag stocks and Treasurys. For more, see our 01/14/2011 column, “An Overview of Gold.”
|By Stephen Foley, The Independent, 08/23/2011|
MarketMinder's View: The headline’s more than a bit much—the world’s fate hardly rests on QE3, though it is worth watching whether Bernanke bows to pressure to just do something. But QE3 or no, Jackson Hole’s most likely output is a lot of idle chatter and hot air. For more, see today’s cover story, “Jawboning, Speculation and Hot Air.”
|By Staff, BBC News, 08/23/2011|
MarketMinder's View: Manufacturing’s contraction is only part of the story—the service sector grew, and the full PMI survey suggests the eurozone’s economy registered growth overall in August.
|By Jack Hough, Smart Money, 08/23/2011|
MarketMinder's View: Though we never make forecasts for much more than 12 months out—24 months at the most—we agree with much of the analysis that stocks look attractive relative to bonds now. Also, for investors with longer time horizons and growth goals, stocks historically have been the much better bet.
|By Gary Becker, The Becker-Posner Blog, 08/23/2011|
MarketMinder's View: An interesting look at so-called good and bad income inequality and a sound argument for a streamlined, flat tax code.
|By Laura Meckler, The Wall Street Journal, 08/23/2011|
MarketMinder's View: While much red tape remains, every little piece that’s cut makes it that much easier for companies to conduct business in the US.
|By Tyler Cowen, Marginal Revolution, 08/23/2011|
MarketMinder's View: A sensible look at some unnoticed progress on the Emerald Isle.
|By Wendy Kaufman, NPR, 08/23/2011|
MarketMinder's View: Under new guidelines, entrepreneurs are now allowed to immigrate to the US to start their own companies. Being more accommodative to entrepreneurs should help the US continue attracting top talent, which should foster continued growth and competitiveness.
|By Howard Schneider, The Washington Post , 08/23/2011|
MarketMinder's View: European quantitative easing continues.
|By Jason Zweig, WSJ, 08/22/2011|
MarketMinder's View: What’s amazing about this is the conclusion that investors’ sentiment is as bad or worse than in March 2009. But March 2009 was about the all-time best point to be bullish! Investors should never trust their emotions.
|By Staff, Reuters, 08/22/2011|
MarketMinder's View: And consumer confidence surveys, being inherently backward-looking, are never predictive.
|By Hibah Yousuf, CNN Money, 08/22/2011|
MarketMinder's View: In one sense, we agree. We anticipate broad market returns for 2011 overall to be relatively muted. But looking ahead to 2012, we see the bull market resuming with gusto.
|By Jeremy J. Siegel and Jeremy Schwartz, The Wall Street Journal, 08/22/2011|
MarketMinder's View: “We believe that when investors awake from their depressed state, they will realize that they don't have to lend the US government money for 10 years at a negative real yield.” We don’t agree with all of this and never make such long-term forecasts, but it is true stocks currently look very attractive relative to bonds.
|By Tony Czuczka, Bloomberg, 08/22/2011|
MarketMinder's View: More in the ongoing political war of words concerning the PIIGS bailouts. For more, read our 08/19/2011 cover story, “Collateral Combat and More.”
|By Paul J. Lim, The New York Times, 08/22/2011|
MarketMinder's View: Firms are starting to deploy their mountains of cash—a source of ongoing demand.
|By Frank Byrt, The Street, 08/22/2011|
MarketMinder's View: Near-uniform pessimistic sentiment often signals a good time ahead for stocks—remember the saying about being greedy when others are fearful.
|By Dan Burrows, MoneyWatch, 08/19/2011|
MarketMinder's View: Inflation has ticked up lately, but it remains very benign. Further, growth has been positive, but slower in the last two quarters (though accelerating from Q1 to Q2). Those rational facts don’t really paint a picture of “stagflation.”
|By Jilian Mincer, Smart Money, 08/19/2011|
MarketMinder's View: Well, homeownership is nice. But as a long-term investment, there is a huge difference between buying a high-leveraged, undiversified single hard asset like a home and purchasing fully liquid stocks and/or bonds. (Never mind that long term, stock returns simply outpace real estate—and by a huge margin.) Something to consider.
|By Ambrose Evans-Pritchard, The Telegraph, 08/19/2011|
MarketMinder's View: So if bond yields are high, then the US and Europe are at risk for a debt default. If bond yields are low, then we’re in for a Japanese-style “Lost Decade.” We’re not sure that’s a full and complete analysis of this picture.
|By Peter S. Rashish, The Wall Street Journal, 08/19/2011|
MarketMinder's View: All hail the tremendous net global benefits of greater free trade.
|By Thomas Mayer, VOX, 08/19/2011|
MarketMinder's View: An interesting look at how countries/companies focused on innovation and modernization tend to do better over time.
|By Michael Wines and Edward Wong, The New York Times, 08/19/2011|
MarketMinder's View: And why wouldn’t he? Bear in mind, if the US slips back into recession (which at this point we think is unlikely), the rest of the world likely goes into recession too. That doesn’t really impact the relative attractiveness of US debt relative to other nations. Economic growth naturally ebbs and flows, and slowing growth isn’t indicative of long-term stagnancy.
|By Thom Lambert, Truth on the Market, 08/19/2011|
MarketMinder's View: This comes as no surprise to us and is a great example of well-intended legislation’s unintended consequences. If banks can’t make their money collecting fees for providing a service, they’ll find other ways to make their money—and in this case, it looks consumers will be paying up.
|By Jeff Cox, CNBC, 08/18/2011|
MarketMinder's View: Stock market volatility is entirely normal (and always tough to handle)—nothing new there. This article also highlights the bifurcated sentiment pervading the market now, with bulls remaining bullish and bears being bearish as ever.
|By Simon Johnson, The Baseline Scenario, 08/18/2011|
MarketMinder's View: Analysts, economists and the like have spent the last couple years calling for a second Great Depression. And it hasn’t happened yet—and in our view something of that magnitude is unlikely. Though some growth metrics in some places show slowing growth, that’s not uniform. Expectations broadly continue to be for growth globally this year and even next—and we agree.
|By David Enrich and Carrick Mollenkamp, The Wall Street Journal, 08/18/2011|
MarketMinder's View: This discussion is fine, but it’s rather one-sided and leaves out important details that indicate European banks are far stronger and healthier than they were in 2008.
|By Andrea Coombes, MarketWatch, 08/18/2011|
MarketMinder's View: “For 401(k) investors who kept with their equity allocation and continued to contribute to their plan as the financial markets went into free-fall in late 2008, their average account balance grew by 64% in the period from Oct. 1 2008 through June 30, 2011.” This highlights the importance of remaining disciplined to a long-term strategy when volatility increases.
|By Karen Brettell, Reuters, 08/18/2011|
MarketMinder's View: It appears that fears a downgrade would make investors fear US Treasurys have thus far been unfounded. For more, see our 08/09/2011 cover story, “After the Downgrade.”
|By Russell Pearlman, The Wall Street Journal, 08/18/2011|
MarketMinder's View: A decent look at annuities, but in our view, it doesn’t go far enough. First, there have been a number of studies done showing annuity sales rise when stocks are volatile. Essentially, investors become attracted to something they perceive to be safe (albeit with a number of caveats) when stocks are rocky—a nearly perfect example of what may be a short-term emotional decision that carries significant long-term costs and consequences.
|By Gabriele Parussini, The Wall Street Journal, 08/18/2011|
MarketMinder's View: Not sensible because of what S&P said, but because rumor of a downgrade contributed to the market swoon early last week. Those rumors now appear to be entirely unfounded considering all three major ratings agencies have confirmed France’s AAA—for what their opinions are worth.
|By Gail MarksJarvis, Chicago Tribune, 08/17/2011|
MarketMinder's View: We agree the economy seems uncertain today…but when is it ever certain? Different segments rarely ever move in lockstep, and growth rates are always volatile. Economies regularly decelerate a couple years into an expansion before speeding up again, and we don’t see much evidence against a re-acceleration this time.
|By Wilhelmina A. Leigh, The New York Times, 08/17/2011|
MarketMinder's View: Turning corporations into collectively owned non-profits seems a likely recipe for economic stagnation. When companies are profitable, they grow, spend more on research and development and hire more workers—and all of society benefits. Why kill that?
|By Matt Phillips, The Wall Street Journal, 08/17/2011|
MarketMinder's View: The “mirror image” relationship between foreign ownership of Treasurys and the US trade deficit is an interesting observation—but one that actually speaks to the irrelevance of trade deficits. As Americans buy foreign goods, their dollars tend to flow into US financial assets, including Treasurys. That means our trade partners benefit and so do we—or, in other words, there’s no sucking sound.
|By Annie Leonard, The New York Times, 08/17/2011|
MarketMinder's View: In our view, this perspective doesn’t comport with reality. Living standards have been improving globally for decades, the US economy is far, far more diverse than this suggests, and there’s no reason society can’t continue adapting in order to stretch out finite resources. For more, see our 05/05/2011 column, “A Common Thread Between Horse Manure and Peak Oil.”
|By David Parkinson, The Globe and Mail, 08/17/2011|
MarketMinder's View: The idea stocks should have a lower value relative to GDP—solely because there’s a historical trend line—seems an invalid reason to believe stocks are grossly overvalued. Here’s one reason why: S&P 500 companies generate a great deal of their revenue abroad—however, that’s not captured in US GDP. Moreover, GDP is backward-looking while stocks are forward-looking. And last, GDP is not a pure reflection of economic health, for a whole host of reasons.
|By Paula Dwyer, Bloomberg, 08/17/2011|
MarketMinder's View: A very sensible look at why the eurozone’s new proposal of a financial transactions tax has serious deficiencies.
|By Jessica Guynn and Maria L. La Ganga, Los Angeles Times, 08/17/2011|
MarketMinder's View: “Propelled by a more business-friendly Board of Supervisors receptive to doling out tax breaks and other incentives, San Francisco envisions turning a bedroom community for Silicon Valley into a beachhead for technology companies.” Seems like some, even in highly regulated Northern California, see removing red tape and creating a business-friendly environment tend to improve overall economic conditions.
|By Justin Lahart, The Wall Street Journal, 08/17/2011|
MarketMinder's View: Though one data point doesn’t make a trend, the nice uptick in manufacturing and industrial production suggests the fear of a deep economic retrenchment likely exceeds reality.
|By Binyamin Appelbaum, The New York Times, 08/17/2011|
MarketMinder's View: “Politicians and investors are placing a great deal of weight on a crude and rough estimate that has never been particularly reliable.” Too true—GDP is a useful way to evaluate output, to a certain extent, but for the reasons discussed here and others, it’s not a perfect estimate of economic health. For more, see our 07/29/2011 research column, “US Q2 2011 GDP and a Word on Revisions.”
|By Binyamin Appelbaum, The New York Times, 08/17/2011|
MarketMinder's View: “Politicians and investors are placing a great deal of weight on a crude and rough estimate that has never been particularly reliable.” Too true—GDP is a useful way to evaluate output, to a certain extent, but for the reasons discussed here and others, it’s not a perfect estimate of economic health. For more, see our 07/29/2011 research column, “US Q2 2011 GDP and a Word on Revisions.”
|By The Tell Blog, MarketWatch, 08/16/2011|
MarketMinder's View: Charts can be a useful way to illustrate a point, but always remember stocks aren’t serially correlated—meaning what happened yesterday (or in this case, what happened to stocks on average over the past 50 and 200 days) isn’t indicative of what’s to come. For our coverage of last year’s death cross, head-and-shoulders and Hindenburg Omen chatter that didn’t presage anything dire, see our 10/18/2010 cover story, “A Recent History of Technical Analysis’ Recent History Lessons.”
|By Steve Schaefer, Forbes, 08/16/2011|
MarketMinder's View: Fitch announced it will maintain the US’s AAA rating—contrasting with its counterpart’s (S&P’s) recent downgrade. But ratings, good or bad, aren’t what’s interesting here. What is, is the rationale used to maintain the rating is the same S&P cited in its downgrade of the US, but with a totally different take. Seems to us, this is mostly Fitch wanting to avoid the political blowback S&P’s had to endure.
|By Staff, BBC, 08/16/2011|
MarketMinder's View: We’ve detailed this recently, but economies in expansion often decelerate before reaccelerating again—it’s a perfectly normal occurrence historically. For more, see our 08/12/2011 cover story, “A Retail Pop.”
|By Craig Smith, Pittsburgh Tribune-Review, 08/16/2011|
MarketMinder's View: This is a sensible take from Dr. Meltzer—especially his suggestion of “a moratorium on regulation for five years, except for national security.” Regulatory shifting sand is far from an economic plus, and a hiatus on rule making could help set the backdrop for further private-sector growth.
|By Catherine Rampell, The New York Times, 08/16/2011|
MarketMinder's View: As this sensible piece details, all things “Made in China” aren’t as Chinese as the label implies. “About 45 cents goes to China for the cost of the original import. On the other hand, about 55 cents of that dollar pays for services produced in the United States, such as the transportation for the product, rent for the store where the product is sold, the salaries of the salespeople at the store, the cost of marketing the product, the profits for shareholders of the retailer selling the product and so on.”
|By Michael Mandel, The Atlantic, 08/16/2011|
MarketMinder's View: There’s little evidence to suggest the US is suffering from weak productivity growth or lack of investment in manufacturing. In fact, recent data show productivity increases have greatly aided corporations the past several years. Likewise, resurgent manufacturing growth is taking place all across America. Lastly, we would like to point out that while we don’t condone going “Office Space on any piece of expensive consumer electronics,” if you did, you’d likely need to replace said piece of expensive consumer electronics—which would entail going to a US store which employs US salespeople to sell you said product, US transportation workers to get said product to the store, US service people to fix said product when it breaks and so on
|By Derek Kravitz, The Associated Press, 08/16/2011|
MarketMinder's View: The housing market continues to be turbulent, and it may be for some time to come. Don’t expect material improvements in the short term—but even so, this shouldn’t be enough to hold the economy back as it’s already just a hair under its previous highs.
|By Bill McBride, CalculatedRisk, 08/16/2011|
MarketMinder's View: Industrial production reaccelerated in July, logging its fastest growth in 2011—indicating Japan-induced manufacturing disruptions may be subsiding.
|By Ambrose Evans-Pritchard, The Telegraph, 08/15/2011|
MarketMinder's View: This is a vast overstatement of the negative dynamics of the eurozone debt situation. Fact is, policymakers not only at the ECB, but also the IMF and EU have shown willingness to back the euro for over a year. Yes, they have work to do. But claiming the bailout machinery has failed misses the point: It was designed to buy time for other reforms to be enacted. And so far, it’s done that.
|By Nouriel Roubini, Project Syndicate, 08/15/2011|
MarketMinder's View: While markets have been volatile of late, we think this is a stretch. Fact is, events like those listed here aren’t terribly new or different than many that have occurred on roughly an annual basis throughout history. Is capitalism doomed? We think not, and we’re willing to put our money where our mouths are.
|By Andres Cala, The Christian Science Monitor, 08/15/2011|
MarketMinder's View: Rising demand for a basic economic need implies growth, not recession.
|By Jay Akasie, International Business Times, 08/15/2011|
MarketMinder's View: S&P’s downgrade of US debt and the lower interest rates the government paid in its wake should be signs the ratings agencies aren’t as impactful as many think. Now, US policy makers would be well served to follow the market’s lead and downgrade the rating agencies’ importance in existing legislation. For more, see our column on TheStreet.com, “When Two Wrongs Can Make a Right.”
|By Detlev S. Schlichter, The Wall Street Journal, 08/15/2011|
MarketMinder's View: A few questions to consider while reading this piece: In the 40 years since the gold standard’s formal abandonment, have living standards globally improved or deteriorated? Did we have federal government debt prior to 1971? Was it ever higher than today? (Yes.) What is the actual historical track record of growth and government debt under the gold standard? If the world has seen many iterations of “commodity-based money” before, why do we keep abandoning it and going to a fiat system? Last, why does gold—or any commodity—have the value it does? (Because people perceive it to be valuable, which is the exact same reason paper money has a value.)
|By Staff, Associated Press, 08/15/2011|
MarketMinder's View: Political wrangling over plans to quell extant sovereign debt issues in the eurozone continues.
|By Fisher Investments Editorial Staff, Real Clear Markets, 08/15/2011|
MarketMinder's View: Another of our external pieces written for Real Clear Markets.
|By Don Boudreaux, Café Hayek, 08/15/2011|
MarketMinder's View: Professor Boudreaux could post this article every day for the next seven years and it would likely be relevant every time.
|By Takashi Mochizuki, The Australian, 08/15/2011|
MarketMinder's View: Japan’s economy shrank at a slower pace in Q2, showing recovery from March’s earthquake is proceeding faster than economists’ projections.
|By Liam Denning, The Wall Street Journal, 08/15/2011|
MarketMinder's View: Brazilian infrastructure could use an upgrade, possibly bringing both an economic windfall and potential investment opportunities
|By Tim Worstall, Forbes, 08/15/2011|
MarketMinder's View: A very smart piece. Free, unfettered global markets are the worst system of economic organization except for everything else.
|By Stephen Gandel, Time, 08/12/2011|
MarketMinder's View: Economic growth isn’t gangbusters, but growth speeds up and slows down—and that’s normal. Plus, corporate earnings continue to be positive, nonfinancial firms are sitting on huge piles of cash and corporate bond yields remain low—all good for the economy.
|By Paul Krugman, The New York Times, 08/12/2011|
MarketMinder's View: There’s no such thing as what GDP should be or should have been. And using Congressional Budget Office (CBO) estimates to try to invent a comparative shoulda-been GDP measure is misguided. Ask yourself this: What is the CBO’s track record of accuracy? Have they ever forecast a recession?
|By Dave Kansas, SmartMoney, 08/12/2011|
MarketMinder's View: Getting better sleep is not necessarily a financial goal—though investors should certainly consider their risk tolerance. We would simply suggest such considerations include not only the here and now, but how investors will feel 10 and 20 years from now. Moreover, the advice here contains investing “truisms” (like gold is a safe haven or utility stocks are safer than regular stocks) that aren’t necessarily true. The utilities myth is particularly puzzling: Fact is, utility stocks fell more than the general market during the seminal crash of modern history—1929.
|By Staff, Reuters, 08/12/2011|
MarketMinder's View: Sentiment may be low at the moment, but as we’ve said repeatedly, watch what people do, not what they say (or feel). And what consumers are doing is spending—retail sales rose 0.5% in July.
|By Nathan Hale, CBS Moneywatch, 08/12/2011|
MarketMinder's View: “As difficult as it is in times like these, long-term investors know that the insanity that surrounds them today is mere noise in the long-term picture and has nothing whatsoever to do with the fundamental values of corporate America.” Exactly why long-term investors should keep their time horizons in mind and not succumb to fear.
|By Daniel Kruger, Bloomberg, 08/12/2011|
MarketMinder's View: “Results of this week’s auctions show investors are repudiating S&P’s decision to lower its assessment of the US’s creditworthiness to AA+.” The US Treasury market’s depth and liquidity are unmatched, plus it’s interesting to see just how little influence S&P’s rating downgrade had on bond markets in this case. For more, see our 08/09/2011 cover story, “After the Downgrade.”
|By Matt Wirz, The Wall Street Journal, 08/12/2011|
MarketMinder's View: “History shows firms rarely anticipate sovereign failures.” Spot on and no surprise to us—ratings agencies are notoriously late to the game. For more, see our 07/28/2011 cover story, “Confused About Credibility?”
|By Augustino Fontevecchia, Forbes, 08/12/2011|
MarketMinder's View: Absent a global agreement, there isn’t really a way governments can ban short-selling. First of all, those selling short could easily turn to the derivatives market to get similar exposure. Second, global banks (those included in the list mostly are) are likely listed on more than just their local exchanges—which means a short-seller can just short elsewhere.
|By Staff, Associated Press, 08/12/2011|
MarketMinder's View: US consumers continued to spend in July on everything from cars to clothes, despite debt fears and market volatility.
|By Nelson D. Schwartz, The New York Times, 08/11/2011|
MarketMinder's View: Note the comparisons cited in this piece are all feelings (fear, denial, confidence), not actual economic indicators or data. The reality is, folks have compared every bout of volatility over the past three years to 2008—or 1937, the Great Depression, Japan’s Lost Decade and the 1970s. Which really says a lot about the fact folks are still transfixed by 2008 and little about actual, current global economic circumstances. People tend to mentally peg to the negative, but that doesn’t mean the comparison is anything more than an emotional or psychological construct.
|By Michael Schuman, Time, 08/11/2011|
MarketMinder's View: We agree a disorderly eurozone breakup would indeed be bad, but this piece ignores many tools still at European officials’ disposal—and the fact steps taken thus far have seemingly shored up debt concerns for now. For more, see today’s cover story, “A European Update.”
|By Joel Achenbach, The Washington Post, 08/11/2011|
MarketMinder's View: In a word, no. “Buying America’s debt, however, isn’t the same thing as applauding the United States’ current political system”—indeed, it’s not. But doesn’t that say more about the politicians’ transient nature than American decline? Far more lasting is our free market economy and our capitalist roots, which we highly doubt are going anywhere anytime soon.
|By Staff, The New York Times, 08/11/2011|
MarketMinder's View: We agree with the concluding lines: “The United States and the European Union must focus more on spurring economic growth. They should have all along.” But we completely disagree that just because developed governments are cutting spending, they’ll grind growth to a halt. The vast majority of economic growth is generated by the private sector, not the government. Moreover, governments frequently get in the way.
|By Kelly Evans, The Wall Street Journal, 08/11/2011|
MarketMinder's View: Two quotes illustrate perfectly the inherent contradictions in this piece: “[Jobless claims] have a remarkable track record for pegging economic turning points. They also can signal where stocks are headed.” And, “There are a host of reasons now to suspect that the improvement may not last….Second is the sharp selloff in stocks, which has undermined confidence and deepened concerns about economic growth.” Wait—in which direction does the causality run? The reality is jobs numbers aren’t forward looking and recover after growth has settled in. Consider: If unemployment improvement leads recovery, how have we ever come out of recession? Because unemployment’s always been high after recession.
|By David Bisserbe and William Horobin, The Wall Street Journal, 08/11/2011|
MarketMinder's View: Indeed, European bank shares have been hit hard recently—but largely based on rumors which have repeatedly been shown to be just that. Much recent volatility is seemingly more tied to investor fears than actual weaknesses in either the US or across the pond. For more, see today’s cover story, “A European Update.”
|By Allan H. Meltzer, The Wall Street Journal, 08/11/2011|
MarketMinder's View: While we’d disagree with some of the problems cited (like that our trade deficit is a significant issue), our quibbles are far outweighed by our agreement with the prescriptions for promoting future growth, as well the understanding unemployment will fall as the economy grows and businesses are again able to hire folks. We entirely agree many Americans (including politicians) consistently come from an economic viewpoint that’s way too myopic.
|By MarketMinder Editorial Staff, The Street, 08/11/2011|
MarketMinder's View: Another exclusive column by our editorial staff for The Street.
|By Lara Hoffmans, Forbes, 08/11/2011|
MarketMinder's View: Some exclusive content for Forbes from our managing editor.
|By Josh Noble, Financial Times, 08/11/2011|
MarketMinder's View: As we’ve said before, trade deficits or surpluses aren’t the best measure of overall trade activity—and this piece illustrates partly why that is. “According to an ‘economic letter’ from the folks at the San Francisco Fed, when a US consumer buys a Chinese-made product, the majority of the money spent stays right at home in the good ole’ US of A.”
|By Robert Peston, BBC, 08/10/2011|
MarketMinder's View: We’re puzzled as to how this is a five-year downturn: US GDP is but a whisker below its all-time high, has been growing for eight full quarters and most economic readings are registering growth.
|By Dani Rodrik, Project Syndicate, 08/10/2011|
MarketMinder's View: Why is it bad that more workers work in less dangerous service industry jobs? If a nation’s wealth, output and opportunities are increasing, it doesn’t matter where the jobs are.
|By Jay Akasie, International Business Times, 08/10/2011|
MarketMinder's View: We won’t argue with the notion folks aren’t upbeat right now—but this doesn’t mean the economy can’t grow. Folks often say one thing and do another, and what they do is far more meaningful.
|By Ambrose Evans-Pritchard, The Telegraph, 08/10/2011|
MarketMinder's View: Though we agree QE2 wasn’t necessary, the idea it was a “social revolution by subterfuge” seems far-fetched. By all means, watch monetary policy closely, but there’s no evidence QE2 has had either the terrible consequences the detractors think or the positive effects its proponents trumpet.
|By Chiara Basarri, Bloomberg, 08/10/2011|
MarketMinder's View: Lower yields and higher demand for Italian debt would seem to lessen the likelihood of an Italian bailout, at least in the near term—a positive development for one of the stronger PIIGS. However, the government’s structural reforms will be vital for that country’s longer-term economic viability.
|By Bob Veres, Financial Planning, 08/10/2011|
MarketMinder's View: Though the argument is a bit overstated and US-centric, on balance, this is a sensible look at recent market action. For more, see our 08/09/2011 cover story, “After the Downgrade.”
|By Staff, The Sydney Morning Herald, 08/10/2011|
MarketMinder's View: “Skilled migrants deliver significant benefits to the Australian economy as their employment contributes to economic growth and their relative youth offsets some of the impacts of the aging labor force.” Free-flowing labor and capital aid growth globally.
|By Lefteris Papadimas and Harry Papachristou, The Globe and Mail, 08/10/2011|
MarketMinder's View: More progress in what’s so far been an apparently orderly restructuring of Greek debt. For more, see our 07/25/2011 cover story, “Huddling Up on Greece.”
|By Robin Sidel, The Wall Street Journal, 08/10/2011|
MarketMinder's View: Regulation, no matter how well intended, can carry unintended negative consequences—including stifling commerce, as this story details.
|By Joe McDonald, Taiwan News, 08/10/2011|
MarketMinder's View: Higher total trade—an extant trend in China, the US and elsewhere—tells us global demand remains healthy. For more, see our 04/12/2011 cover story, “The Totality of Trade.”
|By Cordell Eddings and Susanne Walker, Bloomberg, 08/09/2011|
MarketMinder's View: Since Friday’s S&P downgrade of the US’s long-term credit rating, strong demand has pushed 2- and 10-year yields to record lows, indicating investors weren’t and aren’t solely attracted to US debt by high credit ratings.
|By Michael Schuman, Time, 08/09/2011|
MarketMinder's View: To say that the government lacks saviors because governments can’t spend is to misunderstand who is ultimately responsible for economic growth. Government spending is swamped by private spending—that’s where growth comes from. If governments want faster growth, they must create an environment conducive to that—which means reducing barriers and increasing incentives for businesses to produce.
|By William Kazer, Aaron Back and Andrew Browne, The Wall Street Journal, 08/09/2011|
MarketMinder's View: Chinese prices continued to climb in July, but that shouldn’t be surprising. The strength of the Chinese economy has propelled consumer prices higher for some time now. However, in our view, China has taken appropriate steps to tighten monetary policy and reign in prices. Likewise, the impact of falling energy and food prices may take some time to work through its economy but likely won’t be reflected for some time. For more on China in 2012, see our 08/04/2011 research column, “China’s Election Cycle—Planning for 2012.”
|By Andrew Ackerman and Jeff Bater, The Wall Street Journal, 08/09/2011|
MarketMinder's View: That US productivity dropped in Q2 and was revised down for Q1 shouldn’t be terribly surprising given recently released GDP figures. In our view, productivity declines are the natural result of increased hiring and aren’t unusual at this point.
|By Eric Chaney and Jean Shorasio, The Wall Street Journal, 08/09/2011|
MarketMinder's View: Yes, the economy currently faces challenges. But that’s always the case—no expansion is pristine. For more, see our 07/20/2011 cover story, “Beyond the Headlines.”
|By Larry Kudlow, Real Clear Markets, 08/09/2011|
MarketMinder's View: We don’t agree with everything said here, but the following certainly resonates with us: “Do not panic. Market corrections come and go. They are not the end of the world. Most times they are actually healthy.” For more, see today’s cover story, “After the Downgrade.”
|By Brian Blackstone and Charles Forelle, The Wall Street Journal, 08/09/2011|
MarketMinder's View: Though investors remain worried about a potential bailout, yields on Italian and Spanish debt fell following the ECB’s debt purchases—likely exactly the ECB’s aim since lower yields decrease the need for emergency funding in the near term.
|By Staff, Associated Press, 08/09/2011|
MarketMinder's View: Although OPEC revised growth demand slightly downward, the world’s overall appetite for crude should continue to increase. For more, see our 07/29/2011 cover story, “The American Energy Revolution.”
|By Nouriel Roubini, Financial Times, 08/08/2011|
MarketMinder's View: Yes, there are negatives in the world—but there are also positives, positives that have outweighed negatives for two years now (since the economy has grown for that long).
|By Mohammed El-Erian, Financial Times, 08/08/2011|
MarketMinder's View: That the highly flawed opinion of less-than-credible S&P has changed is not a “Sputnik moment.” And Treasury investors apparently agree, considering yields fell on the news. To us, this rating change was more political than anything else.
|By Gary Strauss, Richard Wolf, John Waggoner and Matt Krantz, USA Today, 08/08/2011|
MarketMinder's View: Though the past week was certainly volatile and the closing days of the week dipped into correction territory, we think this is much more characteristic of just that—a correction, not a bear market. Corrections and volatility commonly happen during expansions and bull markets without foreshadowing economic weakness or recession. For more, see our 08/05/2011 cover story, “Corrective Action.”
|By Emi Kolawole, The Washington Post, 08/08/2011|
MarketMinder's View: “All this downgrade talk, from Wall Street to Washington to Silicon Valley, raises the question of America’s ability to innovate in the future.” We entirely disagree. S&P’s downgrade (mathematical error in it included) says much more about the overstated importance of credit raters and their political prognostications than it does anything about private-sector America.
|By Burton Malkiel, The Wall Street Journal, 08/08/2011|
MarketMinder's View: While there are aspects of this piece we’d quibble with, on the whole, it’s a sensible look at present market volatility. One of our favorite quotes: “No one has ever become rich by being a long-term bear on the fortunes of the United States.” For more, see today’s cover story, “Veritable Volatility.”
|By Min Zeng, The Wall Street Journal, 08/08/2011|
MarketMinder's View: So S&P downgraded long-term US debt Friday to AA+ from AAA. And today, contrary to the popular assumption a downgrade would immediately increase interest rates, US long-term bond yields fell.
|By Kristen Donovan and Paul Taylor, International Business Times, 08/08/2011|
MarketMinder's View: Italian and Spanish bond yields fell sharply Monday in the wake of this news. It also amounts essentially to quantitative easing on the part of the ECB—a change in direction from recent past bond purchases and a development to watch.
|By Manikandan Raman, International Business Times, 08/05/2011|
MarketMinder's View: It could be and will at some point in the future. In our view, it’s not terribly soon. Corporate earnings continue to be strong, and bond yields overall continue to fall—a sign the market views default risk as lower now. GDP is still growing (albeit slowly) and global trade continues to increase—among other positive factors.
|By Cyrus Sanati, CNN Money, 08/05/2011|
MarketMinder's View: As big as Thursday’s market action was, you can’t conflate one day’s market movement to a forward assessment of market direction. If that were true, markets would be unidirectional—but they’re not.
|By Paul Krugman, The New York Times, 08/05/2011|
MarketMinder's View: Actually, Thursday’s big drop is likely what is normal—though trying—market volatility. The US economy does continue to recover—and while it hit a soft patch in Q1 into Q2, it seems to be reaccelerating.
|By Dave Kansas, The Wall Street Journal, 08/05/2011|
MarketMinder's View: Yes, the market drop yesterday was big. But the decision to stay put or make changes amid big volatility should be driven by investors’ 12-month or so forward-looking outlook of market direction, not simply the attempt to avoid more near-term volatility. For more, see today’s cover story, “Corrective Action.”
|By David Weidner, The Wall Street Journal, 08/05/2011|
MarketMinder's View: Indeed. I for “ignore.”
|By Chris Isidore, CNN Money, 08/05/2011|
MarketMinder's View: Nonfarm payrolls increased by 117,000 in July, more than expected. While not a forward-looking indicator of economic or market health, improving employment numbers can help boost sentiment.
|By Mark J. Perry, Carpe Diem, 08/05/2011|
MarketMinder's View: “The economic lessons here are: a) people respond to incentives, b) if you tax something, you get less of it, and c) taxes (and regulations) are distortionary because people change their behavior to find ways around them.”
|By Ambrose Evans-Pritchard, The Telegraph, 08/04/2011|
MarketMinder's View: The analogy to the late 1930s doesn’t really work, in our view. Sovereignties facing difficult decisions are making choices best suited to their economic situations—they’re not uniformly, massively imposing fiscal austerity. Look no further than the US, where $2.1 trillion in cuts over 10 years can hardly be described as a staggering blow to government spending. For more, see our 08/03/2011 cover story, “Half Full or Half Empty?”
|By Peter Coy, Bloomberg Businessweek, 08/04/2011|
MarketMinder's View: There’s little arguing the economy’s growing slower than most would like—but it is still growing. That it’s slowed recently needn’t presage a recession.
|By Floyd Norris, The New York Times, 08/04/2011|
MarketMinder's View: “As you may recall, we heard a lot about fundamentals when the American economy was sliding into recession in 2007 and early 2008.” Right—because the problems in 2008 were tied more to the deleterious impact of ill-advised accounting rule FAS-157 and the subsequent haphazard government response. So to say we’re headed for economic Armageddon just because global leaders are pointing out solid fundamentals is to inaccurately ascribe cause and effect.
|By Stephen Gandel, Time, 08/04/2011|
MarketMinder's View: The arguments here are based on the assumption Treasury rates would rise in a downgrade’s wake. But history doesn’t support that—in fact, data show rates mostly return to normal levels within about three weeks of a downgrade. For more, see today’s cover story, “The Elocution of Bond Yields.”
|By Geoffrey T. Smith, The Wall Street Journal, 08/04/2011|
MarketMinder's View: As we’ve said before, the eurozone still has many tools at its disposal to avert wider contagion or collapse—and it seems the ECB recognizes that as well and is doing what’s necessary to backstop struggling countries.
|By Mark J. Perry, Carpe Diem, 08/04/2011|
MarketMinder's View: “The ‘natural gas revolution’ is not only creating thousands of new US jobs directly involved with the exploration, drilling and extraction of shale gas, but it’s also creating thousands of new jobs in the domestic industries that support shale gas production, like steel tubes and shale sand, to highlight just a few.” For more, see our 07/07/2011 cover story, “Government’s Very Un-Invisible Hand.”
|By Chico Harlan, The Washington Post, 08/04/2011|
MarketMinder's View: That global central banks are able to intervene when necessary to prevent wider issues of contagion shows they have many tools at their disposal in effecting monetary policy.
|By Roger Altman, Financial Times, 08/04/2011|
MarketMinder's View: This piece makes some solid points—namely, the chance of a US default was always near zero. Now that a deal’s been signed, that chance is basically gone, making the threat of a downgrade seemingly superfluous—though we wouldn’t put it past the raters to do something effectively meaningless. The process may have been ugly, but it’s the outcome that matters.
|By Steven Russolillo, The Wall Street Journal, 08/03/2011|
MarketMinder's View: Dow Theory is predicated upon the poorly constructed and not-very representative price-weighted indexes. Likewise, since stocks are not serially correlated, backward looking indications of these indexes have no predictable power over their future. Said differently, past performance tells you nothing about future performance.
|By Sarah Rainey, The Telegraph , 08/03/2011|
MarketMinder's View: PIIGS concerns continue to grab headlines and contribute to near-term volatility. But eurozone leaders have consistently shown a willingness to back the euro. Moreover, not all PIIGS nations face equal or the same problems. Simply, Italy is not Spain, which is not Ireland. And Ireland’s not Portugal, and Portugal, in turn, isn’t Greece. To highlight some differences, see Richard Barley’s Sensible Story from the WSJ, “Italy Can Weather Bond Storm for a While.”
|By Staff, International Business Times, 08/03/2011|
MarketMinder's View: The “early signs” outlined in this piece are hardly new, emerging signs—they’re the same old stories stocks have been battling all year. For more, see our 07/20/2011 cover story, “Beyond the Headlines.”
|By Jeffry Bartash, MarketWatch, 08/03/2011|
MarketMinder's View: True, the ISM services index slowed more than expected in July. But it’s still in expansionary territory, as it has been for many months—a point not noted in the article.
|By Scott Patterson, USA Today, 08/03/2011|
MarketMinder's View: Investors are mostly attracted to Treasurys because of deep US capital markets and the government’s ability to service debt—ratings from agencies with dubious track records have little to do with Treasurys-appeal. For more, see our 07/28/2011 cover story, “Confused About Credibility?”
|By Lori Montgomery, The Washington Post, 08/03/2011|
MarketMinder's View: The president signed the 103rd debt ceiling increase into law yesterday. And despite the ballyhoo in the headlines, the most recent increase played out nearly exactly as past increases. For more, see today’s cover story, “Half Full or Half Empty.”
|By Richard Barley, The Wall Street Journal , 08/03/2011|
MarketMinder's View: A review of Italy’s existing debt shows “Italy can live with current high interest rates.” Italy’s biggest problem, especially in the near term, may be investor sentiment.
|By Stephen Gordon, The Globe and Mail, 08/03/2011|
MarketMinder's View: Here’s an interesting look at how a preoccupation with one economic metric can cause investors to miss the larger picture. Often, what might seem like a negative is simply a positive elsewhere—largely offsetting the impact.
|By Staff, MarketWatch, 08/03/2011|
MarketMinder's View: The employment picture in the US will likely continue to improve (albeit unevenly) as private businesses recover. Regardless, investors should remember that, historically, elevated unemployment doesn’t cause market downturns or new recessions. For more, see our 05/12/2011 cover story, “WPA, Reductio Ad Absurdum.”
|By Roya Wolverson, Time, 08/02/2011|
MarketMinder's View: This vastly overstates the slowdown in worldwide manufacturing activity. Truth is, one reading does not a trend make. Likewise, that corporate earnings have been exceptionally strong of late is proof consumers (be they American or foreign) are still spending and manufacturing has some support to rebound. For more, see our 07/18/2011 cover story, “Breaking News –US Manufacturing Isn’t Dead.”
|By Daniel Indivilgio, The Atlantic, 08/02/2011|
MarketMinder's View: The indicators shown here amount to a selective and skewed view of the economy. Just consider: It includes sentiment surveys (consumer confidence and small business optimism), housing and employment. But omitted are trade, business investment and a host of other statistical references that aren’t lagging indicators and are far more reflective of the economy than what surveys say. In addition, no weighting has been associated with each one provided. As such, this attempt to quantify the economy is seriously lacking.
|By Justin Lahart, The Wall Street Journal, 08/02/2011|
MarketMinder's View: “Goldman Sachs economists have come up with a rule of thumb to determine if the economy has entered recession: If the three month average of the unemployment rate increases by more than 0.35 percentage points, the economy will enter recession within the next six months.” No matter how data are massaged, the unemployment rate is a wonky, lagging indicator—often rising, then falling by varying degrees—and this statistic has little power to predict future economic direction.
|By Catherine Rampell, The New York Times, 08/02/2011|
MarketMinder's View: We agree with the premise economic growth is what alleviates debt problems (real or perceived). But the analysis of economic growth, what’s holding us back and why the debt is a bigger problem today is off base. Debt doesn’t care what it’s spent on—so that our debt is derived from deficit spending on different things than it was during WWII is not very relevant. Furthermore, the claim more government spending is needed to fix the economy is an overstatement. Again, let’s use the WWII era: Many feared renewed depression in 1946 as government war spending fell and troops returned home. Instead, an economic boom occurred. The economy is just far more complicated than this piece assumes.
|By Jeffry Bartash, MarketWatch, 08/02/2011|
MarketMinder's View: July’s consumer spending number wasn’t terribly pretty, but one should always keep in mind economic data frequently fluctuate: In this case, nominal consumer spending fell a handful of times in the 2001-2007 expansion without presaging a recession. Also, remember US companies today are more and more multinationally focused, and even a slight slowdown in product demand here can be bolstered by external demand from foreign consumers. Case in point: multinationals with better earnings reports, thanks to foreign business growth.
|By Staff, Associated Press, 08/02/2011|
MarketMinder's View: Ratings agencies certainly could still downgrade US debt. But as this article points out, a downgrade is far from the catastrophe many seem to think it is. “I think no matter what happens, Treasurys are the safe haven. No other market is as large or as liquid.” For more, see our 07/28/2011 cover story, “Confused About Credibility?”
|By Don Boudreax, Café Hayek, 08/02/2011|
MarketMinder's View: Sometimes a story about how capitalism has changed our lives is a nice reminder of its pioneering and medicinal power over economies.
|By Eric Savitz, Forbes, 08/02/2011|
MarketMinder's View: “A few IPOs does not a bubble make. For one thing, the stock market bubble that blew apart a decade ago reflected widespread mania for tech stocks generally and not just Internet stocks specifically. Net stocks alone could not have lifted the Nasdaq to the 5,000 level. It took participation from the wider market--and the upbeat view that we were entering a new economy that was going to solve a lot of the problems created by the old economy.” Well said. For more, see our 05/20/2011 cover story, “What Bubble Hunters Miss.”
|By Clare Ansberry, The Wall Street Journal, 08/02/2011|
MarketMinder's View: Here’s an interesting article about a rust belt city experiencing economic revival tied to foreign direct investment from a French company and the rise of hydraulic fracturing. For more, see our 07/29/2011 cover story, “The American Energy Revolution.”
|By Ambrose Evans-Pritchard, The Telegraph, 08/01/2011|
MarketMinder's View: “We can only pray that at least one half of the Atlantic system holds relatively firm. If both go down together, buy a shotgun and prepare for 1932.” That’s quite a statement. Further, in one sentence, we’re told, “These are not normal times,” and yet, three paragraphs later, we’re then told, “The economy is curing itself in time-honoured fashion.” For all the trans-Atlantic political wrangling lately, the global economy is growing—and politicians will likely do what’s needed to avert the dire scenarios laid out here.
|By Staff, Spiegel, 08/01/2011|
MarketMinder's View: It’s somewhat interesting more CDSs are being taken out on Italy than any other country, but it says little about the likelihood of a CDS-triggering event (or the measures already in place to help mitigate that risk throughout the EU). Investing is all about probabilities—but this piece is about “ifs” and possibilities. All in all, that amounts to something less than useful for investors.
|By David Hunkar, Seeking Alpha, 08/01/2011|
MarketMinder's View: There’s a bevy of economic data that disagrees. Moreover, the focus of this article is on employment—which is today and has historically been a lagging indicator.
|By Dave Lindorff, Financial Planning, 08/01/2011|
MarketMinder's View: Considering Friday’s US GDP report showed positive growth—completing two full years of growth—we don’t think a double dip is at all likely. But beyond that, this article cites credit ratings firm Moody’s economists as saying, “It’s very important not to bring on budget cuts until we can be reasonably certain that the US economy is self-sustaining.” That seems entirely at odds with their position on budget cuts in the recent flap about the debt ceiling and the US’ credit rating.
|By Kelly Evans, The Wall Street Journal, 08/01/2011|
MarketMinder's View: Sure, manufacturing dipped a bit, but don’t get caught up in monthly numbers. Everything has its ups and downs—this is hardly a signal we are on the brink of QE III. It’s highly speculative to suggest you might know what’s on the minds of the Federal Open Market Committee based on one economic data point.
|By Daniel Kruger and Allison Bennett, Bloomberg via Businessweek, 08/01/2011|
MarketMinder's View: This is spot-on accurate, in our view. Fact is, US debt isn’t attractive solely because it’s AAA-rated, and a downgrade is unlikely to have lasting and material effects on rates. For more, see our 07/27/2011 research column, “A Global Overview of AAA-Rated Sovereign Debt Securities.”
|By Staff, Reuters, 08/01/2011|
MarketMinder's View: “US construction spending unexpectedly rose in June to touch a six-month high as an increase in private outlays offset a drop to a four-year low in public spending, a government report showed on Monday.” It’s early to make much of recent data, but housing and construction have shown some signs of improvement lately.
|By Joel Millman, The Wall Street Journal, 08/01/2011|
MarketMinder's View: An interesting look at how Asian economic growth is positively impacting an import/export terminal in Washington state.